Finally I’ve worked it out after years of wondering why a “Practice” is called a “Practice”.
I think it is because the business is mostly practicing to be a business. When a “practice” has made it everyone calls it “a firm”.THE common denominator in a Practice appears to be that the Principle, or Principals collectively, are mostly running to stand still.They are busy…they are working hard….but they are usually running on the spot and rarely really
building a businesswhich will live beyond themselves.What stops them becoming something more than diligent busy practitioners though?
There are some common denominators which seem to keep practices at the “just practicing to be a business” level, and they are:
Zero Strategy. There is no “big idea” for differentiation, or even any strong sense of what the purpose and end game is.
No Sales & Marketing Plans. There is little in the way of tactical planning for generating new client enquiries, or converting opportunities. It is largely an ad hoc process reliant upon the personal skill level of a Principal.
Poor Investment In people. Generally a very small proportion of the annual budget is dedicated to investing in growing business skills of the team. Most training budgets are spent on basic technical or compliance knowledge, and what little is dedicated to investing in growing business skills is usually invested only in the Principals. The result? Point 4…
No Leverage. The Practice relies upon the knowledge, skill, tenacity and energy of just 1 or 2 key people to drive revenue instead of creating leverage. This is then compounded by…
Poor People Management. Principals are usually caring individuals – that’s is one of things attracting them to a professional service arena in the first place. And they are usually “good bosses” in that they try to look after their people. But they don’t manage them well. One of the key roles of a Principal is to be the leading mentor, motivator and visionary. That requires ongoing effort, time and attention being given to the staff. The other big killer in the staff management area is lack of delegation. Technicians have a strong tendency to feel that others do not execute as well as they can, so they tend to retain too many tasks. Or worse, they do not give responsibility to staff and allow them to do the work without interference.
Being a Benevolent Dictator. Often the Principal sees them self as having all the answers…being the Guru…and of course, being in charge. Dictatorships don’t tend to breed lasting dynasties because the perspectives and thinking become too narrow. Practices often stay at “practicing” level simply because they do not bring in wider thinking, knowledge and skills at the governance level.
Don’t really KNOW where their clients are going. While practitioners know their clients at a superficial level – income, what groups they belong to, what sort of coffee to have ready when they come in for an appointment – they don’t really keep track of what the clients changing attitudes, beliefs, lifestyles, desires are. The key to remaining invaluable to clients is to understand where they are going, and to help them get there. Yet, the majority of the focus in professional services is upon understanding either where they have been, or where they are now, or just the “where to get to next”. The real value is in knowing what lies beyond “next” in your clients minds.
Poor Cash & Capital Management. Oddly, for all our knowledge of how money, investment and business work, most Practices regularly have cash flow issues. It usually comes down to one of three reasons; poor financial information/reporting internally; or; insufficient sales/new business (see point 2!); or; the Principals withdraw more cash than the business can sustain. When this is combined with inadequate capital to begin with, and little to no capital accumulation strategy for the business, we see a practice which is in reality just a “lifestyle business”.
No imagination or innovation. Practices stick with the tried and true. Because it worked 40, or 20, or even 10 years ago as a business idea or a business model it must continue to work huh? Sorry, the world is changing fast. It is this lack of imagination about how clients may want to work or use services in the future which stifles the ability to innovate the Practices offering to the market place.
Principals have surrendered. Probably the saddest reason for practices to just stay practicing is that the Principals have actually just given up. They have surrendered their business ambition. Overwhelmed with compliance, or rules & regulation…perhaps too tired to deal with the perpetually problematic human element in professional services(clients and staff are just so difficult to deal with aren’t they?)…or just plain bored with the humdrum of largely doing the same thing day in and day out. Whatever the key driver was that got them there, the reality is many Principals have just given up trying to build a business.Related:
Advisors: How to Get the New Hire Relationship RightThere is absolutely nothing wrong of course with deliberately building a lifestyle business. If that was the intention and desire of the Principal, and that is what they have built, you can definitely call that a success.For those who started out wanting to build a business that was something more though and who find themselves still in “practice” mode, your breakthrough to building a “firm” most likely will be in improving in these 10 areas.
